The announcement was made following extensive consultations with stakeholders
including the government, Volta River Authority, Independent Power Producers
(IPP) and civil society organisations.

However, these reductions are
twice as much as the expectations of industry and other consumers.

Member Associations of the Trades
Union Congress (TUC), as reported in an earlier edition of the Economy Times,
demanded for 20 percent tariffs cut and expressed their appreciation of the
government’s intention to reduce electricity tariffs this year as captured in
the 2018 budget.

The various member labour unions
of TUC said, given the negative impact of the existing high tariffs on economic
activities and on the living standards of households, a significant reduction
is in the right direction.

“We think a significant reduction in tariffs
is justified when we take into consideration the generally low incomes in the
country,” TUC said in proposals for tariff review submitted to the Public
Utilities and Regulatory Commission (PURC).

The PURC, was initially against
any tariff reduction due to the fact that the power utility companies had
called for increase in tariffs, but surprisingly has announced such a high
reduction for all categories of users. The utility companies cited foreign
exchange losses as reason for seeking the increment, as most of their inputs
are imported, while bills are paid in cedis as well as the effects of
inflation. Indeed they claim they have been incurring financial losses.

This has kept some energy experts
and general public conjecturing and asking, if there is something somewhere along the power supply chain that
the public is not been informed about, or if PURC simply acted under undue pressure
from government to tow its line as it had promise in the 2018 budget that it
wanted to reduce tariffs. However, the PURC has come out to clear such doubts
that, they acted under undue pressure to announce the reduction.

PURC, in pursuance of section 3a
and 16 of the PURC Act 1997 (Act 538) and in line with its electricity rates
setting guidelines, in February 2018, held a series of consultations with
stakeholders in the sector during which some of the service providers pushed
for an increased in their allocations and received tariff proposals from the
Volta River Authority (VRA), the Ghana Grid Company Limited (GRIDCo),
Electricity Company of Ghana (ECG), Northern Electricity Distribution Company
Limited ((NEDCo), and Enclave Power Company Limited.

The VRA request was in respect of
128.4% upward adjustment in the Bulk Generation Tariff (BGT). On the other hand
GRIDCo suggested a 62.9% increase in the Transmission Service Charge (TSC). ECG
and NEDCo proposed a 64.9% and 204% respective increase in the Distribution
Service Charge (DSC).

Economy Times information gathered reveals that, PURC’s review and analysis of
the tariff proposal submitted by the Utility Service Providers (USPs) indicated
a total revenue requirement of GHC 58.138 billion to be recovered from the
regulated electricity market.

The overall effect of the requested BGT, TSC and DSC increases is that there
should be a 27.4% increase in Average End User Tariff – from GHp 63.7694/kWh to
GHp 81.2309/kWh.

Notwithstanding the proposals by
the Utility Service Providers, PURC indicates that based on the results of
their own analysis and review, a 12.54% reduction in tariffs across board for
all categories of consumers is possible. The parties contemplated achieving
this, by first removing the 5% PURC benchmark provision for uncollectibles
which has been part of the revenue requirements for the Distribution Utilities
and second, by taking into consideration a 31.5% growth in customer population
between 2015 and 2018.

Moreover, the African Centre for
Energy Policy (ACEP) and Industrial and Commercial Workers Union (ICU) have
lauded the Public Utilities Regulatory Commission (PURC) over the reduction of
electricity tariff.

Describing the action as the best news ever in recent years, the two
organisations said it will bring relief to Ghanaians and bolster businesses.

But, a member of Parliament’s Committee on Mines and Energy, Edward Bawa
believes the PURC was pressured by government to reduce tariffs beyond
realistic margins.

Mr. Bawa advised the PURC to withstand what he termed as “bullying” from
government and put the interest of the country ahead of political interest with
regards to the adjustment of utility tariffs.

“I appreciate the enormity of the task before the PURC. Particularly as the
Government, led by no less a person than the President of the republic, has
been breathing down the Commission’s neck to ensure that an electoral promise
is fulfilled even if it is at the peril of the Power Sector. The Commission
must be bold and stand up to the bullying government and place the long-term
interest of the state above a political party’s interest,” he said in a
statement.

He pointed out that, Citifmonline.com had reported that PURC may not be able to
reduce tariffs by the 14% margin for industrial and residential users promised
by President Nana Akufo-Addo, arguing that documents sighted by citifmonline.com
indicate that the PURC was instead pushing for a 12.54% reduction in the
tariffs for businesses instead.

Although Mr. Bawa, said he is not against a reduction in the tariffs, he stated
that it would be unfortunate for the government to mount undue pressure on the
PURC in order to fulfill political promises.

He however admonished government to remove the taxes on utilities if they want
to drive the costs for Ghanaians down, instead of putting the PURC in a tight
corner.

“I believe in tariff reduction. This is because many Ghanaians are either
receiving low incomes or are without any regular income. However, it is wrong
for government to subject the utility sector to profiteering. My proposal is
that government must scrap all levies and taxes on electricity as a means of
improving access and making it affordable to all Ghanaians. This is the way to
go instead of the attempt to eat into the revenues of the Utility Service
Providers,” he added.

PURC Director of Operations, Abubakar Jabaru
however has explained that the renegotiation of some energy deals and the
customer growth rate of the utility companies informed the decision.

"We looked at their presentations and [decided] to revise the benchmark
from 4 percent to 3.8 percent," he said of the companies in a discussion
with Joy News' Evans Mensah.

He said the government has shown the commitment to reduce tariffs and as
utility regulator, the PURC believes it is time the benchmark is revised.

Although shocked by the reduction, ACEP Executive Director Benjamin Boakye said
it will spur industrial growth and make Ghana competitive in the sub-region.

"It's good for competitiveness [and] we can expect many consumers coming
onto the grid but what I do hope is that the utilities will pick up and up
their game and be efficient in delivering their services," he said.

Welcoming the announcement as the best news in recent times, ICU General
Secretary, Solomon Kotei said the cost of living in the country will go down as
a result of the reduction.

But Ghanaians are going to take their calculators to keenly monitor how much
would be knocked off their bills when implementation starts, he said.

"It is a huge relief to the society...we will not experience dumsor,"
he said, but he could not confirm whether their members will reduce the price
of their commodities.

Mr Bawa, aware of initiat
deliberations between the utility services providers and PURC, said notwithstanding
the possible areas where the reduction will come from, a few questions need to
be answered. Below are the questions: “Is this an attempt by PURC not to
contradict the President who jumped the gun to announce reductions in tariffs
for categories of customers?

“Without an appreciable shift in other variables, any reduction in tariffs can
threaten the sustainability of the Utility Service Providers and has PURC, also
taken into account the increasing dominance of thermal power generation in the
overall generation mix?

“There are new thermal plants being introduced onto the grid, so has PURC considered a possibility of increased
distribution losses that must be accounted for?

He further asked, “How will a proposed reduction cater for a further strengthening
of the Transmission network and send signals to customers to improve
efficiency. And how will this reduction minimise GRIDCo’s risk exposure to
energy volume variations?

“There is excess capacity comprising AKSA Karpowership and CENIT totalling
780MW. This translates to a total energy of 6287GWh. In monetary terms this
constitutes about GHC 2.364 billion idle capacity payments. The consequence of
not utilising this excess capacity is that government risks pilling debt as the
guarantor of all the plants’ production capacity that will be available in
excess of demand unless, this is absorbed in the tariff. Has this been
considered in the PURC proposal of tariff reduction?

“Has the Commission equally
factored in the increasing natural gas requirements?. PURC must pay attention
to the fact that LNG price is going to vary depending on Brent Crude oil
removing the element of price stability associated with gas.”

In their proposal to PURC before
the recent review of tariffs and subsequent announcement of the new tariffs,
the workers’ union explained that the review should fulfill objectives such as
access to reliable and affordable electricity and water, improvement in the
quality of service of utility companies, and ensure that utility tariffs reflect
prudent cost.

TUC observed that one major challenge for the growth of the private sector in
Ghana has to do with high utility tariffs, adding that it is important that the
review takes into account the plight of the domestic private sector,
particularly the SMEs.

“The utility companies are demanding cost-reflective tariffs. We expect PURC to
ensure that unjustifiable costs are not passed on to consumers.

“The resistance to tariff is due, partly, to the fact that consumers are paying
for inefficiencies of utility companies, especially costs arising from
political decisions that had only served the interest of some political
elites,” it added.

“ The review process resulted in
reductions in key utility cost. The reductions, which are based on PURC’s 2015 Gazetted
Electricity Tariffs, are only on the energy charges and range from 10% to 30%.
Maximum Demand and Service Charges remain the same as that of the 2015 gazetted
tariffs,” a statement from PURC said.

Further, it said that the basis for the reduction were the “removal of 5% PURC
Benchmark Provision for Uncollectible, which over the years has been allowed as
part of the overall revenue requirements for the distribution utilities, and
also a 31.5% growth in customer population from 3,575,733 in 2015 to 4,702,735,
by 2018, which would have an adverse effect on cost of production.

The PURC said it also took into consideration the impending Private Sector
Participation (PSP) concession within the Electricity Distribution Sector.

The commission said the decision was arrived at after extensive consultations
with stakeholders in the sector, as well as detailed analyses of proposals
tendered in by companies in the power distribution chain.

“Review of water tariffs requires further consultations, and the commission is
unable to announce a decision at this time. Water tariffs, therefore, remain
the same and a decision will be taken in the coming weeks,” the statement said.

The commission received tariff proposals from the utility service providers in
the electricity sectors; namely, Ghana Grid Company Limited (GRIDCo),
Electricity Company of Ghana (ECG), Northern Electricity Distribution Company
(NEDCo), Enclave Power Company Limited (EPCL), and the Ghana Water Company
Limited (GWCL).